The valuation of shares and the share exchange ratio is reasonable and fair.

10 The statement that the

report is fair should be supported by materials like valuation report by independent valuation experts so
as to prove that price has not been understated. Lastly, the court held that once the aforesaid broad
parameters have been met, the Court will not question the commercial wisdom of the majority of the
members even if in its view, there would be a better scheme for the company and its members or
creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that
ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme
rather than its supervisory jurisdiction. (III) Interpretation of Section 394 (4)(b) Section 394(4)(b) states
that a „transferee company‟ under the section can only be a „company within the meaning of this Act‟
while a „transferor company‟ can be „any body corporate, whether within the meaning of the Act or
not‟. The expression „body corporate‟ includes a foreign company under Section 2(7). Thus, under the
purview of Section 394, a foreign company can amalgamate/merge into an Indian company with the
sanction of the court.11 The permissibility of such cross border mergers is also evident from the
provisions of the Income Tax Act, 1961. Under the Income Tax Act, an amalgamation means the merger
of one or more companies with another company or the merger of two or more companies to form one
company12 subject to fulfillment of the conditions specified thereunder. Section 2(17) defines a
company to include a foreign company as well. Section 47(vi) specifies that a transfer in the scheme of
amalgamation is not to be regarded as transfer for the purposes of charge of capital gains tax where the
amalgamated company (i.e. the resulting company) is an Indian company. Furthermore, section 47(vii)
exempts a transfer of shares by shareholders of shares in the amalgamating company (foreign company
in our case) if the transfer is made in consideration of the allotment to him of any share or shares in the
amalgamated company which is required to be an Indian company. Thus, merger of a foreign company
into an Indian company is expressly allowed and receives tax benefits.